City Sugar gets approval for Tk1,300cr mortgage-backed bond
The proposed bond will be secured and mortgage-backed, non-convertible, and fully redeemable, with an estimated discount rate of around 13.50%.
City Sugar Industries Limited, a concern of City Group, has received regulatory approval to raise Tk1,300 crore through a three-year zero-coupon bond.
The approval was granted by the Bangladesh Securities and Exchange Commission (BSEC) at a meeting today (30 March), according to a press release.
The proposed bond will be secured and mortgage-backed, non-convertible, and fully redeemable, with an estimated discount rate of around 13.50%. Under the structure, the company will provide land as collateral, offering enhanced security to investors.
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The bond will be issued through private placement to corporate entities, high-net-worth individuals, banks, financial institutions, and insurance companies. Each unit of the bond will carry a face value of Tk13 lakh.
Officials said the proceeds from the bond issuance will be used to repay existing liabilities with various banks and financial institutions, helping the company restructure its debt and improve financial stability.
BRAC EPL Investments Limited has been appointed as the trustee of the bond, while BRAC Bank will act as the arranger. The bond is also expected to be listed on the Alternative Trading Board, providing a platform for secondary market trading.
Syed Rashed Hussain, chief executive officer of BRAC EPL Investments, said the mortgage-backed nature of the bond ensures a higher level of security for investors.
He explained that the company's land will be transferred under the trustee as collateral, and in case of default, the trustee will have the authority to liquidate the assets to repay investors.
He added that this is the first instance of a mortgage-backed bond issuance in Bangladesh, setting a precedent in the local capital market and potentially opening the door for similar structured financing instruments in the future.
Earlier, City Auto Rice and Dal Mills Limited, another concern of City Group, issued a Tk350 crore bond for repaying the debt.
Market analysts believe the move reflects a growing trend among corporates to explore alternative financing options beyond traditional bank loans, while also offering investors more secure investment avenues.
